FDD Talk 2019: Drama Kids International Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Drama Kids International franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Drama Kids International franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Drama Kids International franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Drama Kids International outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Drama Kids International’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average, high, and low gross sales for the top third, middle third, and bottom third of the 52 Drama Kids franchises that have been operating for over one year on a full-time basis (i.e. holding at least five classes per week during the school year months of September through May)

• 2018 average, high, and low student enrollments during the school year for the top third, middle third, and bottom third of the 52 Drama Kids franchises that have been operating for over one year on a full-time basis

• 2018 average, high, and low number of classes per week during the school year for the top third, middle third, and bottom third of the 52 Drama Kids franchises that have been operating for over one year on a full-time basis

Section I – Background Information

15 Things You Need to Know About the Drama Kids International Franchise

Ranked Best Children’s Enrichment Franchise for Under $50,000 in Entrepreneur Magazine’s 2019 Franchise 500

1.  In mid-January 2019, Drama Kids International announced that it had once again been ranked as the Best Children’s Enrichment Franchise for Under $50,000 in Entrepreneur Magazine’s 2019 Franchise 500. In addition, Drama Kids International was again ranked in the top 200 franchise systems worldwide among over 1,000 franchise brands evaluated. Of the 111 child-related franchises considered, only 46 made the list of top 500 brands.

2.  Charlie Kerr, president of Drama Kids, said, “We are very honored and proud that the nation’s top business magazine for current and aspiring small business owners has once again recognized the success and excellence of the Drama Kids organization. The growing demand for our classes nationwide signifies that students and parents are seeking fun and enriching ways to build students’ self-confidence, public speaking and communication skills, as well as their creative thinking abilities through the fun of developmental drama. We are the nation’s largest after-school drama program because we develop important life skills in children to help them discover their full potential.”

3.  Kerr also pointed out that in the lead-in article to the rankings in the January edition of the magazine, Entrepreneur editors noted that franchises aimed at kids have been growing steadily recently, and that children’s enrichment businesses continue to perform well. He added, “Drama Kids is the perfect low-cost, home based franchise business opportunity for anyone with a passion for making a difference in the lives of children. We are poised for even greater success in 2019, with plans to award approximately 20 new franchises throughout the U.S.”

New Location

4.  At the beginning of 2019, Charlie Kerr, president of Drama Kids, said that the company has plans to open about 20 new U.S. franchises. One of the newest Drama Kids International locations was announced in May 2019. This location in Yukon, Oklahoma is owned and operated Kris Heston and Christine White of Oklahoma City. While neither Heston nor White has a background in acting, both said they were active in drama during middle and high school. Drama Kids provides training to franchisees.

5.  At the time of the announcement, Heston and White were finalizing an agreement to open a Drama Kids at the Yukon Community Center this fall. Heston and White’s Drama Kids held classes at the Piedmont Public Library during summer programming.

6.  Jan Scott, director of Yukon Parks and Recreation, said, “We haven’t worked out all the logistics yet as to dates, but we have agreed to work with them. I think it’s something that is different and adds some other form of arts to our programming. They did a booth at Festival of the Child, dressed up kids and took pictures and the kids really enjoyed it.”

7.  The press release also detailed how Drama Kids classes work. The lesson plan is structured to move students from the most elementary communications skills to learning improvisation, a discipline that is considered one of the most difficult in the acting profession.

8.  According to Heston, “We help develop children’s communication skills, confidence, creativity and we do that by teaching them different acting and drama techniques. One of the things we do is called a start line. We will say, ‘the sky is blue.’ They repeat that and then we ask them to tell what they think about that, how you feel about that, what that means to them.”

9.  Drama Kids classes are structured differently than a children’s theatre troupe where scripts feature a star and few supporting roles. “Nobody is particularly singled out to be the star of the show,” Heston said. “They may have separate roles, but everyone has a line, and everyone gets to participate.”

10.  Additionally, the Drama Kids program has the power to draw out students who are shy or withdrawn. While touring other franchises, Heston noted, “In two of the classes there was a child that was shy and intimidated and didn’t want to participate. One of the things the program prides itself on is it helps children to be communicative and interact and be creative. Even in that one hour, in both instances those children became involved in the class. At the beginning they were not, but they were looking or moving or saying words or talking.”

11.  Heston added that the Drama Kids program is one hour a week after school from September through May and while the cost depends on overhead expenses, it averages around $60 per month. Students perform a winter and spring presentation to demonstrate to parents the lessons they have learned.

Company History

12.  Drama Kids International traces its history back to 1979 when Australian actress Helen O’Grady began offering after school drama classes for children in Perth, Australia. O’Grady’s classes were so popular that she formalized the program in 1985. The program uses various fun and fast paced drama activities to build children’s speaking, acting, and social skills.

13.  Initially, the program was called The Helen O’Grady Children’s Drama Academy and by 1987 the program had been established at several locations around Perth. Two years later, The Helen O’Grady Children’s Drama Academy began franchising both domestically in Australia and around the world.

14.  Eventually, the company changed its name to Drama Kids International and there are now locations throughout the United States, Australia, New Zealand, South Africa, Southeast Asia, and Europe.

Entrepreneur’s Franchise 500

15.  Drama Kids International ranked No. 153 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Drama Kids International franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Drama Kids International’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  50
• Outlets at the End of the Year:  63
• Net Change:  +13

2017

• Outlets at the Start of the Year:  63
• Outlets at the End of the Year:  71
• Net Change:  +8

2018

• Outlets at the Start of the Year:  71
• Outlets at the End of the Year:  73
• Net Change:  +2

Company-Owned

2016

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2017

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2018

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• On December 31, 2018, Drama Kids had 73 Franchises. Of those 73 Franchises, 52 have been operating their Franchises for over one year on a full-time basis (“Reporting Group”).

• The franchisor defines “full-time basis” as holding at least five classes per week during the school year months of September through May.

• The franchisor divided the Reporting Group into three separate subgroups:

• (a) franchisees in the top 1/3 of all Gross Sales of the Reporting Group (17 franchisees) (“Group One”);
• (b) franchisees in the middle 1/3 of all Gross Sales of the Reporting Group (17 franchisees) (“Group Two”);
• (c) franchisees in the bottom 1/3 of all Gross Sales of the Reporting Group (18 franchisees) (“Group Three”).

• The information in all four tables below is based on Gross Sales reports submitted to the franchisor by the Reporting Group.

Gross Sales

Group One